State pension age in UK will need to rise to 71, says research

Iain stevenson on how recent policy changes might affect personal financeThe state pension age will have to increase to 71 for middle-aged workers if the UK is to maintain the number of workers per retiree. 

This is according to research by the International Longevity Centre (ILC) that looks into the impact of increasing life expectancy and falling birthrates on the state pension.

Its report suggested the current UK retirement age would not be enough and that anyone born after April 1970 may have to work until they are 71 before claiming their pension.

As it stands, the current UK pension age of 66 is predicted to rise to 67 between May 2026 and March 2028. In addition, it is expected to rise to 68 from 2044.

Longer-term pressure

According to the report, the state pension age would need to be 70 or 71 compared with 66 now to maintain the status quo of the constant number of workers per state pensioner.

The recent stalling in life expectancy during the austerity years and COVID-19 has temporarily eased the pressure for increases in state pension age beyond 67, it states.

But after 2027 the longer-term the pressure will be on to increase it to 68 or 69 before that.

Reduction in financial assets

The report points out that younger people do not have the financial assets that their parents and grandparents did. In 2010, those under 40 held just £7.53 of every £100 of wealth.

Over the past decade, this has fallen to only £3.98. The UK’s 14 million Gen Xers save just £200 into their pension pots each month on average – one third of this group are at high risk of retiring on insufficient income. By 2046, it is predicted that around one in eight people aged 65 and over will be renting their home.

In One Hundred Not Out, a report released by the ILC in December 2023, it argues that we should move forward quickly on increasing auto-enrolment minimums while developing systems to auto-enrol self-employed people.

In addition, it calls for an innovation fund to help develop workable mechanisms that would support those working in the gig economy to save.

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